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Supreme Court lets Shoppers challenge proceed

The Supreme Court of Canada agreed on Thursday to hear a challenge to Ontario's ban on private-label generic drugs, a ruling that could boost the fortunes of Canadian pharmacy chains.

The court gave top pharmacy chain Shoppers Drug Mart Corp. (SC-T) and closely held Katz Group leave to challenge a province of Ontario regulation that forbids drugstores from selling their own private-label drugs.

Part of a package of regulatory changes that have weighed on pharmacies' earnings, the rule was upheld by Ontario's highest court in December 2011, and has kept Shoppers from selling its Sanis private-label drugs in the province, its biggest market.

Closely held competitor Katz Group, which operates Rexall drugstores, wants to launch a similar business.

A Supreme Court ruling against Shoppers and Katz could inspire similar bans in other provinces, which have already followed Ontario's lead in cutting prices for generic drugs.

But a decision in the companies' favor would help offset the impact of those price cuts, which along with changes in reimbursement rules have weighed on earnings.